Energy Institute at Haas

Research

EI @ Haas Working Paper WP-265 Abstract

Abstract:
What is the welfare cost of environmental stress? The change in amenity values
resulting from temperature increases may be a substantial unaccounted-for cost of
climate change. Because there is no explicit market for climate, prior work has relied
on cross-sectional variation or survey data to identify this cost. This paper presents an
alternative method of estimating preferences over nonmarket goods which accounts for
unobserved cross-sectional and temporal variation and allows for precise estimates of
nonlinear effects. Specifically, I create a rich dataset on hedonic state: a geographically
and temporally dense collection of updates from the social media platform Twitter,
scored using a set of both human- and machine-trained sentiment analysis algorithms.
Using this dataset, I find limited evidence of temperature effects on hedonic state in low
temperatures and strong evidence of a sharp decline in hedonic state above 70 degrees F. This
finding is robust across all measures of hedonic state and to a variety of specifications.